The invention relates to methods and systems for online financial services systems; and more particularly, to new methods and systems for facilitating a loan funded by a tax refund in connection with an electronic tax return preparation system.
Computerized (also referred to as “electronic”) tax return preparation applications have become very popular and allow a user, such as a taxpayer or a tax professional, to prepare and electronically file a tax return using a computer. The tax preparation application may be a desktop application that resides and operates on the computer operated by the user or an online application that resides on a server that is accessible by the user's computer via a network such as the internet. The interface for a server based application can be an internet browser or specialized software residing on the local computer. Examples of desktop applications are TurboTax® software for PC and Mac, ProSeries® and Lacerte® tax preparation applications, which are known consumer and professional tax preparation applications available from Intuit Inc., Mountain View, Calif., H&R Block TaxCut software, available from H&R Block, Inc., Kansas City, Mo., and TaxACT® software available from 2nd Story Software, Inc. Examples of online tax return preparation applications are Turbotax® Online, H&R Block Online tax prep, and TaxACT® Online.
Whether a desktop application or an online application, the use of the application to prepare a computerized tax return is basically the same. For example, certain tax preparation applications present a list of tax-related questions or data entry fields to the user as a series of interview screens or fillable forms, in response to which the user enters the appropriate data or answers if they are known. For example, certain interview screens or questions may relate to personal and family information such as the user's social security number, marital status, number of dependents, etc. Other interview screens and questions may relate the taxpayer's finances such as wages, retirement plan contributions, and social security, state and federal taxes that were paid or withheld as provided in Form-W2. The data fields of an electronic tax return may be entered in many other ways, as well. For example, data may be entered into the electronic tax return by filling in data fields in a fillable form, the data may be electronically imported from financial service providers of the taxpayer (such as banks, stock brokers, financial planners, etc.), the data may be transferred from another database on the computer or remotely stored on a different computer or storage device/server, and/or the data may be transferred from a previous year's tax return, or from any other suitable source.
Further, an electronic tax return may be a personal return, joint return, or business or corporate return, and the tax-related questions and/or data fields to be completed are customized for the type of tax return and taxpayer.
Upon entry of all of the taxpayer data, the tax preparation application calculates and prepares an electronic tax return. The completed electronic tax return will include the amount of tax payments made by the taxpayer, such as amounts withheld, estimated tax payments, and any tax credits due to the taxpayer. The completed electronic tax return will also include the total income tax due to be paid by the taxpayer. If the amount of tax payments exceeds the total income tax due, then the tax return indicates that a tax refund is due to the taxpayer. If the total income tax due exceeds the amount of tax payments, then the taxpayer owes an additional tax payment. The electronic tax return may then be formatted as necessary and electronically filed with a tax authority such as the Internal Revenue Service, a state tax authority, or other tax collecting entity, or it may be printed and mailed to the appropriate tax authority, or it submitted in any other suitable manner.
In the case of a tax return that indicates a tax refund due to the taxpayer, the taxpayer can choose to receive the tax refund in various ways. For example, the taxpayer can elect to have all or part of the tax refund applied as an estimated tax payment for the subsequent tax year, and/or the taxpayer can choose to have all or part of the tax refund paid back to the taxpayer as a direct deposit to a financial account of the taxpayer or a check sent to the taxpayer. Some tax preparation services also provide tax refund anticipation loans in which the service pays all or part of the refund to the taxpayer, and the taxpayer agrees to have the refund deposited into the service's account. The service may charge a fee and/or interest on the loan amount from the time of the loan disbursement until the refund is received by the service.
Various financial circumstances arise when an individual, couple, family or small business (collectively referred to as a “borrower” or “borrowers”) has need for a relatively fast and simple unsecured loan. For instance, the borrower may be experiencing temporary financial hardship due to the loss of employment, an injury or disability preventing employment, or an unexpected expense, such as medical bills, a natural disaster, or other unforeseen loss. The borrower may seek a loan to pay their bills in order to avoid the negative consequences of failing to meet their financial obligations, such as foreclosure on a home, eviction from their rental property, loss of basic utilities such as electricity and water, having bills go to collections, etc. Moreover, missed payments may incur late penalties, high interest rates, and negative credit reports.
As another example of when a borrower may seek a loan, the borrower may simply desire to purchase something, but does not have the cash available, does not want to wait until the money is paid such as waiting for an upcoming paycheck, and/or does not want to go through the time-consuming process of applying for a formal loan at a bank or other financial institution.
In order to meet these loan needs, there exist a variety of sources of unsecured consumer loans. These small, uncollateralized consumer loans are often called microloans, as they typically involve loan amounts of less than $25,000. Several examples of microloan lenders include: lenders such as CashCall™ which provide short term unsecured loans, payday loan companies, credit card companies which allow cash advances on credit lines, certain banks and credit unions, and the like. The advantages of such loans generally include short and easy applications, low borrower qualification requirements, a quick approval process, and fast payment of the loan proceeds to the borrower. However, these types of microloans have high upfront fees and/or high interest rates making them very expensive to the borrower. These microloans are expensive for multiple reasons, including the fact that the loans are relatively small, the financial data for the consumer/borrower is limited making it difficult to assess the credit worthiness of the loan, and there is no collateral securing the loan. For instance, short term lenders such as CashCall™ charge interest rates having annual percentage rates (APR) that may exceed 120%. Payday loan companies typically charge a fee of over 9% for a two week loan, which equates to an APR of over 450%. Credit card companies generally charge an upfront cash advance fee of 3-4% and then an interest rate of 10-20%.
Accordingly, there is a need for improved methods and systems of providing microloans which alleviates some of the deficiencies of current microloan lending processes.